Traditionally, small and micro-business owners face a lot of hurdles when trying to raise cash from banks and other public institutions of finance. The bureaucratic and risk averse mentality of these institutions makes borrowing money difficult for upcoming businesses even if they have their finances in order. In such cases, a small business owner usually ends up selling some assets or private property to fund business growth.
While a bank’s unwillingness to lend to a new and upcoming business is understandable in these times of financial turmoil and growing NPAs, it does hurt small businesses with potential for growth. The situation, however, has improved markedly in the last decade as non-banking financial companies have emerged as a source of alternative finance for small and medium enterprises. Nowadays, micro-businesses are also benefitting from short term, small ticket finance offered by these companies.
Also known as FinTech, the NBFCs use a mix of financial products and IoT technologies to speed up the process of business loan approvals. FinTech solutions today are benefitting a growing number of small business owners, startups and freelancers in India and the world. Here are the things that make FinTech finance a veritable alternative to getting small business loans from a bank.
Where banks generally have a limited number of products and services and operate on the principle of ‘one size fits all’, FinTech lenders are doing things a little differently. They are not only offering money that you can use to expand your business but also provide business consulting, foreign exchange services and have different types of business loans and services to best match your needs. Unlike traditional banks, the products and services of FinTech lenders do not focus on large corporations and rather are meant for SMEs.
FinTech products like small ticket working capital loans are helping small business owners fill the gaps in their cash inflow and outflow. This has helped small business owners in taking advantage of sudden business opportunities that come their way. A report from the World Economic Forum has lauded FinTech as the enablers of global business environment for small businesses in developing economies like India.
FinTech lenders are the first to realize that most small business owners are unable to get loans because of the collateral requirements of traditional lenders. A person who has just started a new venture is unlikely to have high-value assets to secure a business loan, which in turn limits his ability for growth. Also, spoiled by lending to larger companies, banks often do not see any benefit in small-ticket loans and categorically deny loan applications which do not meet their policy parameters. Here, FinTech lenders have come up with the concept of small ticket, short-term unsecured business loans.
Now, small business owners can get short term business loans as per their own requirements instead of borrowing according to the lender’s perspective. For example, if a bank’s policy is to only approve business loans above Rs 5 Lakh, a small business owner with a requirement of just Rs 3 Lakh may also end up applying for a loan of Rs 5 Lakh. Which then he will have trouble repaying due to high EMIs. On the other hand, FinTech finance providers like Lendingkart are offering business loans starting from Rs 50,000 up to Rs 1 Crore for eligible loan accounts. Hence, providing flexibility and need-based financial services desired by small business owners.
Loan amounts are not the only thing flexible about FinTech finance. Borrowing from an NBFC also gives business owners the freedom to choose their preferred EMI schedule or prepay the loan without hefty penalties. This makes renewing loan cycles easier and makes FinTech credit a type of revolving finance for working capital needs and capital expansion. On the other hand, banks usually have a fixed repayment cycle that disregards invoicing and sales cycle of a small business.
Once again, a small business is better off borrowing from FinTech lenders like Lendingkart Finance who offer bi-weekly and monthly EMI schedules. Moreover, Lendingkart completely waives off prepayment charges if you decide to settle your loan in full.
The advantage of FinTech finance does not end at the repayment of an existing loan. A business can re-apply for a business loan upon full payment of the existing loan and get an instant approval for the previously approved amount. This is one of the best ways to get small business loans time and again and not only helps your business growth but also contributes to a significant increase in your business credit score.
There is no doubt that FinTech is one of the most transforming platforms for small business owners in the 21st century. By enabling quicker and easier credit, FinTech has provided much-warranted relief to SMEs from their age-old financing problems. FinTech has also helped cut down the informal credit market where private lenders are used to charging exorbitant interest rates (sometimes up to 36% to 48%) from unsuspecting borrowers, trapping them in vicious credit loops. The lower interest rate business loans and reasonable repayment time windows have helped many a small business owner in breaking out and earning their way to success.
Ultimately, FinTech has become an important pillar of nation building in India where 45% of the GDP contribution comes from small and medium business industries. Due to its digital nature, it is a very transparent medium of finance as well, which has helped small businesses join the mainstream and become tax compliant.
If you are looking for an Instant business loan or wish to know more about FinTech finance, visit us at www.lendingkart.com and have a look at our FAQs section. You can also contact us by dropping a mail at firstname.lastname@example.org. To apply for a business loan, simply check your eligibility and create a Lendingkart account to begin your loan application.
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